What do coal, oil and gas really cost? A whole lot more than you may think. They are loaded with “social costs”, or “negative externalities”, like expensive and dangerous side effects that we’ve been unwittingly buying for decades, often in the form of inflated taxes and medical bills.

The direct medical costs from air pollution: Air pollution causes heart and lung disease, along with 7 million premature deaths each year, according to the World Health Organization. A Harvard Medical School study calculated the US medical cost of burning coal at $500 billion per year, or $1,667 per person. There is good news, though: When we stop burning coal, we get healthier, especially kids.

Natural gas is a big problem, too.Gas from hydrofracking is associated with numerous, highly toxic chemicals polluting our groundwater and compromising our public health(1,2,3).Although industry has tried hard to suppress this information, we are starting to see successful litigation around the public health dangers from fracking. Natural gas is not a “clean bridge fuel” at all. When we include the methane escaping from fracking sites and from leaky pipes, natural gas is even worse than burning coal in driving climate change.

We are all paying enormous subsidies to the fossil fuel industry. According to a 2015 report from the International Monetary Fund, fossil fuel subsidies worldwide are worth $5.3 trillion annually, or $10 million per minute, including tax breaks and uncompensated environmental damage. In the words of the research director of the Australia Institute: “The old, false story of ‘cheap’ fossil fuels is bunk. In addition to the health and climate costs that are never accounted for, they’re very directly costing taxpayers billions.”

How will a carbon tax help? Exactly the way a cigarette tax works. For any market to work, prices must reflect actual costs. Today, people see a tax on cigarettes as fair and proper, “internalizing” society’s cost for tobacco-related disease.

Carbon fuels should likewise be priced to reflect what they really cost us. If we want to stop the fossil industry from “freeloading” on us all, we start by putting the cost of pollution back into the cost of the fuel, where it belongs. The fuel cost goes up, but our medical bills and other subsidies go down. A carbon tax is the simplest, the fairest and most efficient way to deal with the social cost of carbon.

Will it really work? Yes. A successful revenue-neutral carbon fee and dividend has been in place in British Columbia since 2009. To see what we have to gain by this policy, visit the Citizens’ Climate Lobby website.

3 Comments

Scott Sattler
May 25, 2016

Great job, Doug. One of your best. May its wisdom spread far and wide!
Scott

Steve Matthews
June 20, 2016

“Fracking” needs to be discussed dispassionately. It has been the only development to date that has resulted in a significant reduction in CO2 emissions. The evidence that methane leaks from fracking are as bad as stated above is at least unclear; it is clear that the threat to water supplies is greatly exaggerated. I am not an apologist for the petroleum industry – they are horrible in many ways – but we should not in our haste do harm to the very goal we wish to achieve.

If the methane issue is resolved, cheap natural gas should continue to reduce coal usage until it too can be replaced by clean renewable sources.

Doug Hendren
June 20, 2016

Natural gas from fracking looked too good to be true, and it was. Recent, peer-reviewed medical publications have documented widespread public health issues due to both air and water pollution. Fracking industry engineers themselves have stated that 6% of casings leak immediately, and 50% of them leak by 15 years. With present fracking techniques, the carbon footprint of fracked natural gas is actually greater than that of coal. A wealth of material can be found in this compendium:

COMPENDIUM OF SCIENTIFIC, MEDICAL, AND MEDIA FINDINGS DEMONSTRATING RISKS AND HARMS OF FRACKING (UNCONVENTIONAL GAS AND OIL EXTRACTION). 3rd edition, Oct 14, 2015. Concerned Health Professionals of New York and Physicians For Social Responsibility.